Term vs. Whole Life Insurance

Choosing the type of policy to buy is undoubtedly the most important step in the life insurance buying process. We'll help you get the best kind of coverage (and the most of it) for your premium dollar.


This page:

  • Defines both permanent life and term insurance

  • Describes the key differences between the two types

  • Links to sources of information and quotes for each policy type

Premiums can vary by as much as 50%. Visit eFinancial, where you can fill out a short form, select a plan, and receive a true personalized quote in minutes. Click here to start.

Use InsureME to compare additional term life and whole life quotes, and get expert advice from an agent in your area, who can help you design a plan that's right for you. Click here to fill out a quick form.

Permanent life insurance: Continual protection

As you might have guessed by its name, permanent life insurance offers you coverage for your entire life. Under a permanent life insurance policy, your coverage will never expire and will never need to be renewed.

Although people often use the term "whole life insurance" to describe any permanent policy, it is, in fact only one type of permanent coverage. Variable and universal policies are also widely available, and are growing in popularity. (The difference between these policies mostly has to do with the amount of control a policyholder can exert over the way policy funds are invested by the insurer - more on that later).

With a permanent policy, the amount for which you are insured, also known as the death benefit, will be paid to your chosen beneficiaries at the time of your death - guaranteed. These policies also often have a "cash-value" or savings feature, and are sometimes called cash value life insurance because of this.

Term insurance: Affordable protection

The financial protection of a term life insurance policy, on the other hand, is limited to that policy's term, usually 10, 15, 20, or 30 years. These policies are less expensive, but they're not guaranteed for life. Once the policy's term is up, the policyholder's beneficiaries have no claim on a death benefit.

The cost of a term policy relies heavily on both the age and health of the insured, the length of the policy term, and the size of the benefit involved. Persons past a certain age, and subject to certain health risks may have trouble qualifying for term coverage.

So which one's right for you?

It's a question of both resources and goals. Term insurance offers an relatively inexpensive way to protect your dependants from financial hardship should anything befall you.

Permanent life insurance requires a lot more financial "ability" than term insurance, but its structure allows policyholders to use the money they've invested for many different purposes - as collateral on a loan, as business protection, etc.

A good rule: unless you can definitely afford permanent coverage and are committed to paying the premiums until your death, you should purchase term life insurance.

And while you're shopping, keep in mind that an insurance agent will almost always recommend permanent coverage over a term policy - insurers make more money off the more expensive plans. So make sure you're not being pressured into buying coverage you don't want or don't need.

If you want more information on each, take a look at one of our in depth guides: term life insurance or whole life insurance (this guide includes detailed information on variable and universal plans too).

To speak with licensed agents offering all types of policies, get a quote from Insurecom.

For more help . . .

Getting the lowest possible premium on your life insurance is almost like an art form. There are many variables to consider, and to get the right balance of term length, benefit amounts, and policy riders and illustrations, you need to take a careful step-by-step approach to the buying process.

Our free life insurance course is designed to help you do just that.

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